Property deals backfire - Swathes of council-owned land lying idle

Documents released to the Irish Examiner under the Freedom of Information Act have shown that private developers and house hunters were not alone in buying into the property bubble, writes Joe Leogue.

Councils across the country also took out significant loans to buy up land with a view to building social housing — only to see their plans unravel as the economic crisis wiped out any hope of these residential developments coming to fruition.

The full extent of how much land bought by councils during the Celtic Tiger and that remains idle today is unknown. What is known, however, is that, in 2010, a land audit found that local authorities had 259 sites covering 775 hectares with a loan value of €500m that might have been suitable for a scheme designed to bail out councils and take their debts off their books.

The Land Aggregation Scheme was described as a mini-Nama — a State-established housing agency would take the land and the loans off the councils for the nominal fee of €1. The councils, in turn, seized the opportunity to relieve themselves of the huge debts they had taken on to buy the sites.

The scheme was overseen by the Department of Environment, Community, and Local Government and in the period to June 2012, the department approved 47 sites covering 173 hectares for inclusion in the scheme at a cost of €111m, some €24.5m of which was accrued interest on the redeemed loans.

A further 25 sites were included under a different arrangement at a cost of €52.15m, before the scheme closed in December 2013.

Having agreed to take sites with a loan value of €164m from the councils, the department announced in December 2013 that the scheme would be discontinued as it had become “unsustainable” — it did not have the level of funding required to bail out the local authorities any further.

However, last September, the Comptroller and Auditor General’s report found that 25 sites were rejected from the scheme and that the councils had debts of €37m associated with land for social and affordable housing that were “unsuitable for residential development”.

Some of the 25 sites in question were found to be in areas that were not zoned for residential development, while others were land-locked or had an illegal halting site or building on the land.

The Irish Examiner has learned that the councils that bought the 25 rejected sites are in Cork, Galway, Dun Laoghaire-Rathdown, Limerick, and Wexford. Further documents released by Limerick, Wexford, and Dun Laoghaire-Rathdown have shed further light on the land deals.

Questions remain, however. Where are the sites in Cork and Galway that were rejected? How much did they cost and why were they not suitable?

Why did councils press ahead with the purchase of land for social housing in areas that were not zoned for residential development?

Why were rural sites and lands with poor access bought for the development of housing? And ultimately, who is to be held responsible for spending millions of taxpayers’ money for sites that remain idle years later, with little hope of development?

Site access was ‘totally substandard’

In 1999, Dún Laoghaire-Rathdown County Council spent over €4.45m on a site for a social housing despite a warning that access was “totally substandard” for development.

Nearly 16 years later the site, at Lehaunstown, Cabinteely, remains idle, and the council’s attempts to shift the debt on the site off its books have been rejected, in part for the very same access problems its chief valuer warned of prior to its purchase.

In 2012, the council unsuccessfully applied to have the site included in the Land Aggregation Scheme, whereby the Government’s housing agency would take the site and its debt from the council, on condition the site had “reasonable residential development potential”.

However, on October 8, 2012, the Department of Local Government wrote to the local authority to warn “the existing road is unlikely to be suitable for future access in its current location” and that “part of the submitted site is on a steep gradient and would be difficult and costly to develop, and therefore the site would need to be apportioned to allow part of it to be included in the scheme”.

The site’s application under the scheme was rejected, and documents released under the Freedom of Information Act show the department’s complaint about the access to the site echoes a warning given by Dún Laoghaire-Rathdown County Council on June 22, 1999.

“The existing access to the property for development purposes is totally substandard and the valuation reflects the need to secure a development access over other lands in the medium term,” the chief valuer warned, prior to the IR£3.5m purchase of the site from Esther Buckley.

A spokesperson for the council refused to comment as to why the local authority went ahead with the purchase given the highlighted access issue, only to say that “any access problems would have been reflected in the value of the site at that time”.

This was the second site that Dún Laoghaire-Rathdown County Council had unsuccessfully attempted to include in the scheme.

In November, it bought 22 acres of land at Ballyman, Rathmichael, from Charles Heron for £6.6m. Prior to the purchase, a senior administrative officer advised that “having regard to zoning and service restrictions, these lands are not for immediate development but would be appropriate for future planning.”

Two years later, councillors expressing concern for the future of the site were told that it was bought “in light of the shortage of land in council ownership for future housing and the escalating land values”.

In August 2012, however, the department rejected the Ballyman application on the grounds that the site was “too rural” to have reasonable residential development potential.

At this point, Owen Keegan, then manager of Dún Laoghaire-Rathdown County Council, wrote to the department to appeal their decision.

“The amount outstanding, including rolled up interest, currently totals €10.964m. If the site is not approved for inclusion in the Land Aggregation Scheme, the council will incur annual repayment costs [of] 0.564. The requirement to..meet these costs will place an enormous strain on the council,” he wrote.

Dun Laoghaire-Rathdown County Council confirmed that it is now paying €331,500 a year to cover an interest-only loan on the two sites.

FOI access to records on €14m land deals refused

Two county councils have refused to disclose details of lands bought for social housing with associated debts of nearly €14m that were subsequently deemed not to have potential for residential development.

Both Cork and Galway County Councils refused to release documents under the Freedom of Information Act relating to the sites they unsuccessfully attempted to have included in the Land Aggregation Scheme.

According to figures released by the Department of Environment, Heritage and Local Government, Cork County Council took out 14 loans for a combined €12,926,765 that went towards 12 sites for the development of social housing.

Galway County Council took out loans to purchase two sites worth €834,227 which were also excluded from the scheme.

However, the location, size and individual prices paid for these sites remain unknown to the public as both councils have refused to release documents relating to the purchase of these 14 sites. Requests for documents relating to the councils’ unsuccessful attempts to have the sites included in the Land Aggregation Scheme were also refused.

In refusing access to the documents, both councils cited Section 36 of the Freedom of Information Act which allows the refusal of a request on the grounds that the information released could cause a financial loss.

“My decision is to refuse you access to the records as requested as the sites are of a commercially sensitive nature, and any negative exposure could potentially deter any prospective buyer from showing any interest in these, or any other lands,” Galway County Council said in its refusal.

A Freedom of Information request to the Department of Environment, Heritage and Local Government was part-granted, however any information within the documents received that may have identified the sites, the reasons why they were excluded from the scheme was redacted.

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